Mediation to Resolve Disputes and Save Valuable Relationships: What Producers Can Do To Educate Their Clients and t

1. Mediation to Resolve Disputes and Save Valuable Relationships: What Producers Can Do To Educate Their Clients and the Sureties They Represent Steven Nelson EVP/General Counsel SureTec Austin, TX Bruce Shreves Managing Partner Simon, Peragine, Smith & Redfearn New Orleans, LA

2. PRESENTERS’ BIOGRAPHIES Steve Nelson is the Executive Vice President and General Counsel of SureTec Insurance Company and President of SureTec Information Systems, Inc. Prior to SureTec, he practiced construction law for 20 years in Dallas, Texas, and was CEO of a large commercial construction company in Central Texas for six years. Mr. Nelson oversees SureTec’s Claims, Funds Disbursement, and Subcontractor Prequalification operations, mediates construction industry disputes for others, and teaches construction and procurement law and dispute resolution at the University of Texas, where he is an adjunct faculty member in its School of Engineering. He is a Fellow of the Center for Public Policy Dispute Resolution and a Distinguished Credentialed Mediator by the Texas Mediator Credentialing Association. He is a Fellow of the American College of Construction Lawyers and a past Chairman of the Construction Law Sections of the State Bar of Texas, Austin Bar Association, and Dallas Bar Association. He is active in the ABA Fidelity & Surety Committee, the ABA Forum on the Construction Industry, the Surety Claims Institute, and National Bond Claims Institute. H. Bruce Shreves, heads the construction/surety practice group at Simon, Peragine, Smith & Redfearn. Prior to entering private practice, he served with the U. S. Department of Justice, Criminal Division, and the U. S. Army Judge Advocate General Corps. Mr. Shreves has lectured and written on numerous occasions on construction and surety law issues for the American Bar Association and other national programs. He has authored numerous publications and papers. He is affiliated with the American Arbitration Association handling dispute resolutions in the construction, insurance and surety industry, specializing in complex construction cases. He currently serves as Chair of the Louisiana Bar's Section on Fidelity, Surety and Construction Law. He is a member of American Bar Association Forum Committee on the Construction Industry, and is past Chair of the American Bar Association’s Fidelity & Surety Law Committee, Tort Trial Insurance Practice Section. He has been a frequent speaker on arbitration and mediation topics for the American Arbitration Association, American Bar Association and other groups.

3. Conflict in the Construction Industry is Predictable

4. Conflict in the Construction Industry is Predictable A good perspective on the construction environment articulated by the District of Columbia Court of Appeals in Blake Construction Company vs. C.J. Coakley Co, Inc., 431 A.2d 569 (D.C. App. 1981), as follows: [E]xcept in the middle of a battlefield, nowhere must men coordinate the movement of other men and all materials in the midst of such chaos and with such limited certainty of present facts and future occurrences as in a huge construction project... Even the most painstaking planning frequently turns out to be mere conjecture and accommodations to changes must necessarily be of the rough, quick and ad hoc sort, analogous to ever changing commands on the battlefield. National Association of Surety Bond Producers Virtual Seminar June 19, 2012

5. "You can't shake handswith a clenched fist.“ ~ Indira Gandhi National Association of Surety Bond Producers Virtual Seminar June 19, 2012

6. Four Primary Methods of Conflict Resolution

7. Conflicts Turn into Claims…Claims Turn into Something Worse… Claim Dispute/ Conflict Issue Question National Association of Surety Bond Producers Virtual Seminar June 19, 2012

8. Weak Systems • There is nothing inherently wrong with conflict • Conflict itself is not the problem • Unresolved conflict is! • The misguided use/failure to use the four primary methods of conflict resolution is what wastes money and hurts people + business relationships • The failure usually lies in a systemic reliance on avoidance, higher authority, or unilateral action—and weak or only partial use of collaboration National Association of Surety Bond Producers Virtual Seminar June 19, 2012

9. The Producer – Early Counselor on “Systems” Choices • Producers often have early warning of problems • Producers may actually have more construction/surety knowledge and dispute resolution training than the contractor’s brother-in-law’s college roommate National Association of Surety Bond Producers Virtual Seminar June 19, 2012

10. DEGREE OF HOSTILITY COST OF RESOLUTION MORE/LESS < CONTROL OF OUTCOME > Parties Decide for Themselves Decision Third Party Imposes Imposes Decision National Association of Surety Bond Producers Virtual Seminar June 19, 2012

11. If the only tool you have is a hammer… …all problems begin to look like nails. National Association of Surety Bond Producers Virtual Seminar June 19, 2012

12. National Association of Surety Bond Producers Virtual Seminar June 19, 2012

13. Every tool is different –Pick the right one. National Association of Surety Bond Producers Virtual Seminar June 19, 2012

14. Facilitation/MediationInvolve Outside Neutrals • Third party neutrals can: • Provide independent + objective counsel • Focus parties on the dispute • Focus parties on their real interests • Allow confidential sharing of information • Gives parties their “day in court” • Reminds people of transaction costs • Create options not otherwise available National Association of Surety Bond Producers Virtual Seminar June 19, 2012

15. It’s Seldom Too Early to Mediate • At contract formation • At first sign of dispute • Pre-litigation/arbitration • Mid-litigation/arbitration • Courthouse steps National Association of Surety Bond Producers Virtual Seminar June 19, 2012

16. Mediation Resolution – Looking for Interests Below the Surface $$The ChangeRequest Amount The Apparent Position SS Project TheHidden, Unrecognized Interests The Next Change Request Liquidated Damages Cash Flow Budget I don’t wanna analyze a detailed claim Career Client Relationship Schedule What will the Boss Say? Industry Reputation The Bottom Line National Association of Surety Bond Producers Virtual Seminar June 19, 2012

17. Mediation • Mediation: Bringing in a respected, neutral, uninvolved person to help everyone reach a mutually acceptable resolution • The mediator DOES NOT decide • Mediation may not resolve a dispute • Key Points: • Voluntary • The resolution is binding, but the process is not • There is no such thing as “Binding Mediation” • You set the rules National Association of Surety Bond Producers Virtual Seminar June 19, 2012

18. Mediation – The Process • Parties provide the Mediator with information to understand the dispute • The Mediator chooses to meet individually with the parties, or to call all parties together in a “joint session” • After a sufficient exchange of information, the Mediator breaks the parties apart and begins shuttle diplomacy • The Mediator works for you – make the Mediator work, not just shuffle back and forth National Association of Surety Bond Producers Virtual Seminar June 19, 2012

19. Mediation – Selecting the Mediator • For construction disputes, it takes a balance of mediation skill and familiarity with subject matter • Parties usually have an opportunity to influence mediator selection • Don’t be penny wise and pound foolish – invest in the right mediator • Resources abound to help locate qualified Mediators – Surety Claims Departments, AAA, JAMS, TIPS F&S Committee Members, NASBP National Association of Surety Bond Producers Virtual Seminar June 19, 2012

20. Mediation – The Resolution • Mediators DO NOT Decide • The Parties decide • But they MAY suggest…the “Mediator’s Proposal” • Usually offered at gridlock • Not always offered • May be requested • NOT binding until all parties accept • The process is still voluntary National Association of Surety Bond Producers Virtual Seminar June 19, 2012

21. Mediation Works! • 80+% Success Rate with Competent Construction Mediators • Saves relationships • Avoids Expense • Saves Contractor/Surety Relationships National Association of Surety Bond Producers Virtual Seminar June 19, 2012

22. National Association of Surety Bond Producers Virtual Seminar Tuesday, June 19, 2012 Thank you! Steven Nelson EVP/General Counsel SureTec (512) 330-1850 snelson@suretec.com suretec.com Bruce Shreves Managing Partner Simon, Peragine, Smith & Redfearn (504) 569-2908 bruces@spsr-law.com spsr-law.com